Business and management

Europe’s largest steelworks

Jobs v health

A TWO-MONTH struggle between a court in Taranto, a city in southern Italy, and Ilva, a steelmaker that owns a large plant there, swung sharply against the firm on September 26th when a judge ruled that the plant—Europe's largest steelworks— must close. In 2011 it produced well over 8m tonnes of steel products, accounting on its own for about one third of the total steel production in Italy.

Environmental pollution and public health are the issues at the heart of the legal battle which began at the end of July when the court ordered that eight members of the plant’s senior management should be placed under house arrest and parts of the plant put under control of judicial custodians. The decision was based on three years of investigations into the health effects of the plant’s emissions. Cases of cancer and cardiac problems had been found to be notably higher near the plant than elsewhere in Taranto. Moreover, and unsurprisingly given these findings, the judge was also worried about the health of workers at the plant.

Covering 15 square kilometres, the steelworks is the biggest plant in an extensive industrial zone west of Taranto that includes an oil refinery, a chemicals plant and a large cement works. Towering plumes of smoke from the steelworks become visible for travellers along Italy's instep coast long before reaching Taranto. One project of many aimed at industrialising and taking employment to Italy's impoverished Mezzogiorno, Taranto's plant was inaugurated in 1965. Once owned by a state holding corporation, Ilva was privatised in 1995 when it was bought by the Riva Group, its current owners.

The judge's ruling in July covered much of the steelworks (including the raw materials storage area, scrap management, the coking plant and blast furnaces) and required that work there should cease. Ilva immediately appealed against the order and the chairman of Confindustria, Italy’s employers' association, expressed concern that closure would not only hurt employment in and around Taranto but industry in Italy generally. Although the government quickly made funds available for cleaning up the site, there are strict limits on how these can be spent and most of the money needed will have to come from the firm.

On August 7th an appeals court upheld the plant's seizure, but released five of the managers from house arrest and did not confirm the plant’s closure. Although the judge did order the plant to be shut down a week later, it continued to tick over at low levels of production in August and September. On September 18th Ilva announced an environmental improvement plan, saying that it is committed to act immediately to reduce particle and other emissions through an extraordinary investment programme worth about €400 million. Yet the judicial custodians told the firm that two of the plant's five blast furnaces and other production areas should be shut down.

In the ruling on September 26th the judge describes the firm's clean-up plan as wholly inadequate. She notes that the Ilva’s proposed interventions are those that the firm, trade unions and the authorities in Taranto and the surrounding region of Puglia had already agreed on in 2003 and 2004. Many of the improvements should have been completed years ago, she says.

Worried about the judge's ruling, Confindustria has spoken up again. “Decisions that lead to the closure of Europe's most important steelworks should be taken in the awareness of the extremely serious consequences that they may create for Italian manufacturing.” The economic impact of the legal battle which has led to protests in Taranto (pictured) are certainly enormous. Ilva employs almost 12,000 workers in Taranto and the plant provides jobs, directly and indirectly, to around twice that number. Ilva alone is estimated to contribute about 10% to the GDP in Puglia which, like all southern regions, suffers from considerably higher unemployment than the north of Italy.

The story of the steelworks in Taranto is thus the story of a struggle of jobs versus health. Everybody is now looking to Corrado Clini, Italy’s environment minister, to find a solution that squares the circle and satisfies the court.

Readers' comments

And indeed this is a difficult circle to square, as plants in China have gained much competitive edge from cutting corners on health and safety. Scandinavia and Germany have mills that are spick and span compared to this old derelict, and arguably they have the technology they invested in.

best thing would be to shut everything down and rely on tourism, given the landscape in this region is beautiful and sea resorts are nice. One just cannot see how to transform 12,000 operators in lifeguards and cooks though.

There is a trade off between prosperity and health. Yes there is. You cannot have perfection. Just incremental movements to an optimum.

Lawyers do not understand economics. This particular judge wants to apply the "law", no doubt badly written. But you cannot have perfect environmental health. Often even the "legal requirements" cannot be reached with any feasible expenditure of resources.

All or none? That is an option. An extreme one. It comes with a cost. The loss of 15,000 jobs and many times that in flow on effects.

So what is the COST of pollution? A concept which is a bit too much for Italian judges, no doubt. But you have to estimate it. But not only the total cost, but the incremental cost at each stage, called the marginal cost. The loss of 1000 jobs for closing one smoke stack, and so on, and work out where the pain equals the gain. At what level of production is there acceptable pollution?

Of course fanatical conservationists (and lawyers) will start screaming about this concept. But in a freely functioning market this trade-off happens all the time, and invisibly. You just have to price the externality, the pollution.

The wages of environmentalists, and lawyers, are paid for by the market process. They live off the "rents".

Vote in the Greens, ask to leave the EU and join Australia as another Tasmania, then you could apply for a large cut of the GST (VAT) and rely on tourism and dole. Season unemployment will be high, most bright youngsters will leave and the population will be ageing fast, but you will be green.
Import the goods from Asia, where they are made to lower standards and pollution per ton of output is higher, but this doesn't count as it is increased global pollution and greenies only measure pollution to GDP in the national economy. This is one possible solution.. casual part time peak season cooks and life guards..

The trend of defending the environment by government is more and more appreciable. Now the healthy environment is more important than economic growth. And European countries are starting to understand it. Such policy is useful for future generations. But there is a problem. Many people have become unemployed. That is why (I think) it is necessary to exchange old factories for new ones which will not pollute the environment. Thus it is possible to solve several problems – to save the healthy environment and to save low unemployment. It will be better for all: for people and for the environment.

On a side issue, the reason why the Italian economy runs so effectively well, despite their idiot laws and judges, is the high degree of corruption. Yes, corruption.

Pay-offs, whether it is in Italy or Nigeria, helps grease the wheels. I have a book on the back burner somewhere I intend to write on "The Optimal Level of Corruption". A bit of shocking concept to non-economists, but it intends to describe the difference between 'good corruption" and "bad corruption". What facilitates the wheels of the economy, and what is just rent seeking and positively harmful. An economic distinction would be very useful for policy (and legal) purposes.

This has to be one of the worst cases of judicial incompetence I've yet heard of.

Whatever gives a mere judge to rule over so many thousand people and livelihoods, in a matter in which he is not really competent to judge?

This type of forced closure should require popular vote; the power of the judiciary should be to request specific emissions reductions (not closure of furnaces, but reductions in the measurable pollution from them), impose small fines for failure to comply, and ultimately to call for a vote on closing the site.

But rent-seeking judiciary should not have this much power of destruction.

And incidentally, if the judiciary have this kind of power to make such rash and destructive decisions, it's no wonder that corruption is endemic.

If solid productive & honestly profitable businesses are driven to illegitimate means of altering or circumventing court decisions, then both the Mafia and the judiciary themselves will inevitable get rich (at the expense of workers, consumers, businesses, taxpayers and Italy's future).

The power concentration must be broken. There must be proper limits, checks & balances on the power of the court viz-a-viz businesses.

with out having suficent information to make a sensible decsion, i will make an ill informed stupid one -) and consider in italys current postion better to kick it down the road. Greece italy spain plenty of places that would make a nice tourist destinations. If could get the tourists create the jobs still be adjustment of living on lower wages which may prove more diffcult that learning how to cook better (for some) or wait a table or clean a room.